An LLC loan is financing where the limited liability company itself is the borrower on the paperwork, with the debt sitting on the business’s books rather than the owner’s personal credit report. Lenders decide whether to approve based on the LLC’s revenue, time in business, and credit profile, and most still ask the owners to personally guarantee the loan. Funding timelines range from a couple of days with online lenders to roughly 60 to 90 days for SBA-backed options.
How Borrowing in the LLC’s Name Works
When your LLC takes out a loan, the company signs the note. The loan appears on the business’s balance sheet, and the lender evaluates the company’s revenue, credit history, and cash flow instead of your personal finances. This works because an LLC is a separate legal entity: it can sign contracts, own assets, and carry debt in its own name. The IRS reinforces that separation by issuing the business its own Employer Identification Number, which functions as the company’s tax ID on every financial transaction.1Internal Revenue Service. Employer Identification Number
Lenders look at the LLC’s business credit profile when deciding whether to lend. Dun & Bradstreet and similar agencies assign scores based on how reliably a company pays its bills, and many banks consult those scores before extending credit.2Dun & Bradstreet. Business Credit Scores and Ratings A solid payment history with vendors and suppliers builds that reputation over time, making future borrowing easier and cheaper. For newer LLCs without an established record, lenders also pull the owners’ personal credit.
Common Types of LLC Loans
Term Loans and Lines of Credit
A term loan delivers a lump sum upfront, repaid in fixed monthly installments over one to ten years depending on the lender and purpose. It fits one-time investments like renovating a space or acquiring another business. Rates can be fixed or variable, so the payment either stays flat or moves with the market.
A business line of credit works more like a credit card. The lender approves a maximum, the LLC draws from it as needed, and interest accrues only on what you actually use. Lines of credit suit uneven cash flow, like seasonal retailers or companies that wait 30 to 60 days on customer invoices. Repaid funds become available to draw again.
Equipment and Accounts Receivable Financing
Equipment financing ties the loan directly to a purchase of machinery, vehicles, or technology, with the equipment itself as collateral. Interest rates tend to be lower because the lender can repossess the asset if payments stop.
Accounts receivable financing lets an LLC borrow against unpaid invoices. The lender advances 70% to 90% of invoice value and charges weekly fees of roughly 1% to 5% of the borrowed amount for each week the invoice remains unpaid. The LLC still owns the invoices and still collects from its customers.
Secured Versus Unsecured
Secured loans require the LLC to pledge collateral, which lowers lender risk and usually lowers the rate. Unsecured loans skip collateral and compensate with higher rates.3U.S. Small Business Administration. Unsecured Business Funding for Small Business Owners Explained A newer LLC without significant assets may only have the unsecured option, and the cost of borrowing will reflect that.
Who Qualifies for an LLC Loan
Requirements vary by lender, but most look at the same core factors:
- Time in business. Traditional banks generally want at least two years. Online lenders often accept six months to a year.
- Annual revenue. Some banks require $100,000 or more for an unsecured credit line, and $250,000 or more for commercial real estate or equipment loans. Online lenders may work with businesses generating as little as $10,000 a month.
- Business credit score. Dun & Bradstreet’s PAYDEX score is the most commonly used. For SBA loans, the FICO Small Business Scoring Service (SBSS) applies, and 160 out of 300 is commonly cited as the minimum.4Dun & Bradstreet. Check Your Small Business Credit
- Personal credit score. Even with the LLC as borrower, lenders typically check the owners’ personal credit, especially for businesses under five years old.
- Debt-to-income ratio. Lenders generally want this below 40% to 50%, counting both existing business debt and the proposed new loan.
LLCs that fall short of those benchmarks still have options. SBA microloans go up to $50,000 with more flexible eligibility, interest rates of 8% to 13%, and repayment terms up to seven years.5U.S. Small Business Administration. Microloans Community Development Financial Institutions (CDFIs) also serve businesses that don’t qualify for conventional bank lending.
Documents to Gather Before Applying
Having the paperwork ready before you apply prevents rejections from simple clerical mismatches. Lenders expect:
- Articles of Organization, the formation document filed with your state.
- Operating Agreement, outlining ownership, management, and decision-making. Not every state requires one, but lenders almost always do.
- Employer Identification Number, the LLC’s federal tax ID.1Internal Revenue Service. Employer Identification Number
- Two to three years of business tax returns.
- A current profit and loss statement and balance sheet.
- Business licenses and proof of insurance.
SBA-backed loans also require SBA Form 1919, the Borrower Information Form, and the financial figures on it have to match your official records exactly.6U.S. Small Business Administration. SBA Form 1919 Borrower Information Confirm that the LLC’s legal name and address match what’s on file with your Secretary of State. Minor discrepancies can stall an application during initial screening.
What LLC Loans Cost
Interest rates swing widely by loan type, lender, and borrower risk. As of early 2026, typical ranges run:
- Business term loans: 10% to 27% APR.
- Business lines of credit: 10% to 28% APR.
- Revenue-based financing: 10% to 40% APR.
- SBA microloans: 8% to 13%.5U.S. Small Business Administration. Microloans
SBA 7(a) loans cap interest based on loan size, with maximum rates set relative to the prime rate. The 7(a) program allows loans up to $5 million, and SBA Express loans are capped at $500,000.7U.S. Small Business Administration. 7(a) Loan Program Terms, Conditions, and Eligibility
Prepayment Penalties
Some lenders charge a fee for paying off the loan early. Penalties typically run 1% to 5% of the remaining balance, sometimes declining each year. SBA 7(a) loans with terms of 15 years or longer follow a specific schedule: 5% in year one, 3% in year two, 1% in year three, and nothing after that. SBA loans with terms under 15 years generally carry no prepayment penalty. Ask before signing: getting locked into a high-rate loan you can’t affordably exit is costly.
Interest Deductibility
Interest paid on business debt is generally deductible on the LLC’s tax return, which lowers the real cost of borrowing. Federal law caps the deduction at 30% of adjusted taxable income for larger businesses, but the cap doesn’t apply to businesses with average annual gross receipts of $31 million or less over the prior three years (as of 2025, adjusted annually for inflation).8Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense Most LLCs seeking their first business loan sit well under that threshold.
Personal Guarantees and What the LLC Doesn’t Shield
The uncomfortable reality of LLC lending is that limited liability protection doesn’t stop lenders from asking owners to personally back the loan. A personal guarantee means that if the LLC defaults, the lender can pursue your personal assets, including savings, real estate, and investment accounts. The guarantee stays in force until the debt is repaid or the lender formally releases you.
For SBA loans, personal guarantees from any owner holding at least a 20% stake are essentially non-negotiable.9GovInfo. 13 CFR Part 120 – Business Loans Owners with substantial personal assets may also be asked to pledge those assets as additional collateral. Conventional bank loans follow similar patterns, with more room to negotiate the scope of the guarantee, such as capping it at a specific dollar amount rather than the full balance.
Piercing the Corporate Veil
Even without a personal guarantee, LLC owners can lose their liability protection by blurring the line between themselves and the business. Courts call this piercing the corporate veil, and it most often happens when owners commingle personal and business funds. Writing a check from the company account to pay your mortgage, or depositing a check made out to the LLC into your personal account, gives a court reason to treat the company as a sham and hold the owners responsible for its debts. The fix is simple. Keep separate bank accounts, don’t use business funds for personal expenses, and maintain clean, distinct financial records.
UCC Filings and Liens on Business Assets
When a lender makes a secured loan to your LLC, it typically files a UCC-1 financing statement with the state. The filing is public, puts other creditors on notice that the lender has a claim on specific assets, and “perfects” the lender’s security interest so it has priority over later creditors.
A blanket lien is the most aggressive version. It covers all or substantially all of the LLC’s assets rather than one piece of equipment or category of property. While a blanket lien is in place, pledging assets to another lender for additional financing becomes difficult, which can limit growth. If the LLC defaults, the lender can seize and sell the covered collateral. UCC-1 filings last five years unless renewed, and state filing fees run roughly $10 to $100.
From Application to Funding
After choosing a lender and submitting the loan package, timelines diverge sharply:
- Online lenders often decide within one to three business days. Some offer same-day approval for smaller amounts using automated underwriting.
- Traditional banks generally take two to four weeks to underwrite a conventional business loan, depending on complexity.
- SBA loans typically run 60 to 90 days from application to closing, and sometimes longer. Underwriting alone can take 10 to 60 days, and the SBA’s own review adds time.
On approval, the lender issues a commitment letter spelling out loan amount, rate, repayment terms, collateral, and any conditions to be met before funds release. Read it carefully. Loan covenants often require the LLC to maintain a minimum debt service coverage ratio, commonly 1.25, meaning the business must generate $1.25 of cash flow for every $1 of annual debt payments. Falling below that ratio can trigger a technical default even if you haven’t missed a payment.
When SBA Financing Is Off the Table
SBA-backed loans aren’t available to every LLC. Federal regulations exclude several categories, including financial businesses primarily engaged in lending, passive-income businesses like real estate holding companies, nonprofits, businesses that get more than one-third of gross revenue from legal gambling, businesses engaged in illegal activity, political and lobbying organizations, speculative ventures like oil exploration, and businesses with prior federal loan defaults that caused a loss.10eCFR. 13 CFR 120.110 – What Businesses Are Ineligible for SBA Business Loans LLCs in these categories still have conventional bank loans, online lenders, and private financing available. The restrictions only block the government-guaranteed programs.
What Happens If the LLC Defaults
Missing payments triggers a chain that escalates fast. Most loan agreements include an acceleration clause, letting the lender demand the entire remaining balance immediately rather than waiting on missed installments. If the loan is secured, the lender can seize and sell the collateral. If you signed a personal guarantee, your personal assets become reachable.
Defaults also get reported to business credit bureaus, making future borrowing harder and more expensive. Without a personal guarantee, only the business credit takes the hit. With one, both business and personal credit suffer. Lenders may pursue legal action or send the debt to collections. Negotiating a workout or modified payment schedule before full default is almost always a better outcome than waiting for enforcement to begin.
Alternatives When You Don’t Qualify
An LLC turned down by a traditional bank still has paths forward. SBA microloans, distributed through nonprofit intermediary lenders, go up to $50,000 with more flexible credit requirements than standard 7(a) loans.5U.S. Small Business Administration. Microloans CDFIs focus on businesses in underserved areas and often accept applicants banks reject.
Online lenders set lower minimums for revenue and time in business, charging higher rates to compensate. Revenue-based financing ties repayments to a percentage of daily or weekly sales and can work for LLCs with strong revenue but limited credit history. Rates can reach 40% APR, so this fits short-term needs where revenue clearly covers the cost rather than long-term capital.